Employers Guide to Apprenticeships

What is an Apprenticeship?

An apprenticeship benefits both employers and individuals, by boosting the skills of the workforce and in turn increasing economic benefits.

There are four different levels of apprenticeships:

1. Intermediate (level 2) – the equivalent to 5 GCSE’s passed from A* – C.
2. Advanced (level 3) – the equivalent to two A-levels.
3. Higher (levels 4, 5, 6 and 7) – the equivalent to a foundation degree and above.
4. Degree (level 6 and 7) – the equivalent to a bachelor’s or master’s degree.

Who are they for?

Individuals over the age of 16, living in England and not in full time education can apply for an apprenticeship.

Employers tend to offer them to new entrants to a business to equip them with new skills to progress and grow within the structure of the company.

Employer’s obligations

The employer must provide on-the-job training to the apprentice and ensure the following:

• their apprentices are paid the Apprenticeship National Minimum Wage of £3.70 an hour if they are aged between 16 – 18 or in the first year of their apprenticeship, and the National Minimum Wage for anyone aged over this. For the current rates, please click here;
• that an apprenticeship agreement is in place;
• that the apprentice is given at least 30 hours of work a week (unless the course is extended); and
• that the apprentices receive all the same benefits as any other employees.

How do they work?

An approved provider and assessment organisation, such as a University or training provider, will work closely with an employer to provide the best training possible for the apprentice, whilst also considering an employer’s needs.

It can include a variety of ‘on-the-job’ training, or off site training/mentoring depending on the type of apprenticeship and the wishes of the employer.

The Apprenticeship Levy

If employers have an annual wage bill of £3 million or more, they must pay the Apprenticeship Levy.

The calculation of an employer’s overall wage bill will include payments for:

• wages;
• bonuses;
• commissions; and
• pension contributions.

Employers must keep a record of the information they have used to calculate their levy payment for at least 3 years after the tax year to which they relate.

Since 6 April 2017, and if the above applies, employers will be required to disclose to HMRC how much they owe at the start of each tax year, and make payments each month. The levy is charged at 0.5% of an employer’s annual wage bill.

Payment will be collected through an employer’s normal PAYE system alongside Income Tax and National Insurance Contributions.

Once payments are made, employers have the option of claiming the contributions back as digital vouchers to pay for training apprentices internally. This creates a Digital Account with a bank of vouchers that can then be accessed. It should be noted however, that the funds in the Digital Account expire after 24 months, and the funds drawn from this cannot be used to pay wages, travel or subsidiary costs, managerial costs, work placements, traineeships, or the cost of setting up the initial apprenticeship programme.

The Government do not want the payment to be viewed as a tax for employers, as the benefits arising out of training staff through these schemes far outweigh the small contribution required. To further facilitate this, the Government also distribute a 10% top-up to the monthly contributions. This therefore means that for every £1 an employer pays in; they can draw £1.10 back through the digital vouchers.

The Apprenticeship Levy allowance

All employers, regardless of whether they are paying the levy or not, will receive an apprenticeship allowance of £15,000 in digital vouchers each tax year. This allowance can be spread across an employer’s various connected companies and charities however it chooses.

It should be noted that the Government sets funding caps on each apprenticeship programme, and the funding bands vary depending on the industry that the employer requires training in.

What if I don’t pay the Apprenticeship Levy?

If you do not pay the Apprenticeship Levy, you will use training providers paid directly by the Government using the £15,000 allowance allocated to your business.

The trainer must be on the registered list provided by the Government, and the negotiation of price must adhere to any funding caps.

Employers who do not pay the Apprenticeship Levy must also contribute 10% of funding towards the cost of their apprenticeship training scheme. This is known as ‘co-investment’.

Government support

Apprentices aged 16 – 18

• To encourage more young individuals to start apprenticeships, the Government announced a 20% increase in the amount of funding for apprentices ages 16 – 18, which goes directly to the training provider. A training provider will also receive a £1,000 incentive if they provide training to people in this age bracket.
• If you have below 50 employees, and take on an apprentice in this age bracket, you will not be required to pay the 10% co-investment, and therefore the training costs will be fully covered by the Government.

Apprentices in care

• If an employer takes on an apprentice who has been in care, or has a Local Authority Education, the Government will provide £1,000 to the employer and training provider to pay for the additional support required.

If you have any questions about the content of any of this guide, please contact a member of our Employment, HR and Business Immigration team by emailing: employment@mlplaw.co.uk. Alternatively, please call 0161 926 9969.

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